A group of FTX U.S.-based employees from the LedgerX team acquired by FTX in 2021 discovered a code backdoor.
FTX Employees Discovered A $65 Billion Loophole In Alameda Months Before The Collapse
A group of FTX U.S.-based employees from the LedgerX team acquired by FTX in 2021 discovered a code backdoor allowing Alameda up to $65 billion in negative balances using customer funds, according to the WSJ.
Examining FTX's international platform for U.S. compliance, they alerted their boss Julie Schoening, who reported it to FTX's Director of Engineering Nishad Singh, a member of Sam Bankman-Fried’s inner circle.
The employees believed the issue was fixed after Singh removed some code, however the loophole remained open. By August, Schoening was fired for allegedly sending other employees "inappropriate messages," though some said it was due to the FTX risk management issues that Schoening identified.
The backdoor is central to prosecutors' case against Sam Bankman-Fried, who faces fraud charges for his role in the companies' intertwined operations. Singh has already pleaded guilty and could testify against SBF.
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